Jobless-benefits bill fails in House

About 2 million jobless will stop getting checks by year’s end

By

RuthMantell

WASHINGTON (MarketWatch) — A bill to extend federally funded benefits for the long-term jobless failed to pass in the House of Representatives Thursday.

The bill needed to capture a two-thirds vote to pass under the “fast-track” rules Democrats used to bring it to the floor. However, only 258 lawmakers voted in favor of the extension — 237 Democrats and 21 Republicans — while 154 voted against it — 11 Democrats and 143 Republicans. See how representatives voted.

After Thursday’s vote, House Democratic leaders said that lawmakers will continue to work on an extension.

The bill would have extended emergency federal unemployment-insurance benefits through February, at a cost of $12.5 billion. Without an extension, about 2 million people will be cut off from benefits by the end of the year.

“Terminating this emergency unemployment assistance will not only devastate families, but it also will hurt the entire economy by depressing consumer confidence and demand,” said Rep. Sander Levin, a Democrat from Michigan, in a statement prior to the vote. “We simply cannot afford to conclude this Congress without responding to those Americans who have been most hurt by the recession,” added Levin, who was a co-sponsor of the bill.

Democrats, including President Barack Obama, have supported additional benefits, while Republicans have criticized spending that widens the deficit.

Each dollar the federal government spends today on extending unemployment benefits will raise gross domestic product by $1.60 a year from now, according to an analysis by Mark Zandi, chief economist at Moody’s Analytics. That “bang-for-the-buck” compares with, for example, just 35 cents per dollar for making the Bush-era tax cuts permanent. Read story on how rare cases are being used to argue against the estate tax.

Weekly unemployment-insurance benefits are intended to replace a portion of a worker’s income so that families can eat and make their mortgage payments along with other basic expenses. In the hardest-hit states, beneficiaries can receive unemployment benefits for up to 99 weeks, receiving around $300 per week. The first 26 weeks of payments are from regular state unemployment benefits. For those who exhaust regular state payments, federally funded programs can add up to an additional 73 weeks.

Protecting against poverty

Without unemployment benefits, last year’s poverty rate would have been 15.4%, versus its recorded rate of 14.3%, according to a new analysis by the Congressional Budget Office. Families receiving benefits received a median amount of $6,000, or 11% of their income for the year, according to the CBO. Read CBO report on unemployment insurance.

“For some families, UI was the main source of income during the weeks that family members were unemployed,” the CBO report said.

Critics say extended unemployment provides a disincentive to work. However, with an ongoing unemployment rate close to 10% — it was 9.6% in October — and about five potential job seekers for each opening, supporters of extended benefits counter that there are too few opportunities.

An April estimate from the Federal Reserve Bank of San Francisco found that if benefits had not been extended last year, the unemployment rate would have been lower by about four-tenths of a percentage point at the end of 2009 — 9.6% instead of 10%. The unemployment rate was about 10% in October, November and December last year.

Some would like to see benefits extended for a much longer period than the House bill called for. Recent analysis from the Economic Policy Institute, a think tank in Washington, found that continuing extensions through 2011 would cost about $65 billion, but would increase gross domestic product by about $105 billion, translating to about 488,000 payroll jobs.

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